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By Subhayu Ghosh – VP Product & Growth at TIER Mobility
The Apple App Store boasts approximately 1,096,000 apps, while Google offers a whopping 2.8 million options. This stark contrast in choices might raise eyebrows, but the real intrigue lies in the financial arena. Remarkably, Apple’s revenue nearly doubled that of Google’s, despite having only two-thirds of the apps. This enigmatic phenomenon hints at the existence of a special allure, a captivating magic.
Hence uncovering the elusive product strategies and secrets that underlie Apple’s success would be very interesting. Subhayu Ghosh, VP Product & Growth at TIER Mobility is going to distill his 21 years of expertise in understanding the Apple product. In this blog, we’ll put on the product manager’s hat and delve deep into Apple’s method of defining product attributes and executing sales strategies. Further, we’ll unravel the source of Apple’s infectious magic and the desirability that surrounds its brand and products.
In the realm of customer-centricity, customers undoubtedly take center stage, with everything orbiting around their needs and desires. Hence when we reflect on the resounding success of the Apple iPhone, it becomes evident that product managers must immerse themselves in customer insights to craft exceptional products through groundbreaking innovations. Apple’s recipe for success is remarkably straightforward: a great, innovative product backed up with the best of technology. These three seemingly simple, yet profoundly effective, components are the core of creating a superior product. So, one might ponder, why do other companies often struggle to replicate this formula?
Let’s scrutinize the three phones – the iPhone 11, Samsung A51, and ZTE Nubia Red Magic 5G in terms of the product and technology angle:
1. Battery Life: The iPhone 11 appears to lag behind the Samsung A51 and ZTE Nubia Red Magic 5G in terms of battery life.
2. Processor: While the iPhone 11 features a hexa-core processor with 12.5 GHz, Samsung boasts an octa-core processor with 16 GHz, and ZTE Nubia Red Magic 5G offers an octa-core with 17.3 GHz. This suggests that the latter two devices are more powerful in terms of processing capabilities.
3. Display: In screen resolution and screen-to-body ratio, the Samsung A51 outshines the iPhone 11, offering a higher PPI (Pixels Per Inch) which is 405 PPI compared to the 326 PPI of the iPhone and a better screen-to-body ratio, which is 87.4% compared to 79% of the iPhone.
4. Camera: Samsung A51 with a 48 MP quad-core rear camera and 32 MP front selfie camera and ZTE Nubia Red Magic 5G with an 84 MP quad-core rear camera compared to the iPhone 11 with a 12 MP rear camera and 12 MP front selfie camera, potentially provides better photography and selfie experiences.
While all three phones have the same internal memory, touchscreen, and similar speeds, the product and technology comparison indeed indicate that Samsung A51 and ZTE Nubia Red Magic 5G offer more comprehensive features.
When we explore the innovation angle in the smartphone landscape, it becomes evident that the iPhone 11, while a solid device, might not be the pinnacle of innovation when compared to some of the unique offerings in the market, which include:
1. Stylus Phone with Voice Changer: There’s a phone that doubles as a stylus with intriguing features like a voice changer, offering an exciting and experimental experience.
2. Energizer Two-in-One Phone and Power Bank: This device combines a phone with a power bank, providing an all-in-one solution for users on the go.
3. Ear Pods Charger Phone: Another innovation includes a phone with a built-in charger for ear pods, simplifying the charging process for accessories.
4. Rugged Safari Phone with Thermal Camera: Designed for extreme environments like jungle safaris, this rugged phone features durability, resilience, and a thermal camera for unique use cases.
5. Watch Phone: A phone that doubles as a watch, offering a comprehensive set of features in a wearable format.
6. Foldable 2-in-1 Tablet-Phone: This innovative device seamlessly transitions between a phone and tablet, combining convenience and functionality.
7. No-Phone for Phone Detox: A “no-phone” made of plastic serves as a symbolic device for individuals seeking to break their phone addiction while maintaining basic communication capabilities.
8. Full Plastic Phones for Prisons: These phones are entirely made of plastic to avoid detection by metal detectors, addressing the unique needs of prisoners.
These examples showcase diverse and creative innovations beyond the standard smartphone. In comparison, the iPhone 11 may not stand out as the most innovative option.
This exploration suggests that the initial assumption that a product’s success relies solely on differentiation, technology, or innovation is not the secret sauce. So a product manager who thinks that they know everything is actually a failure.
The best product managers who can actually create such products are the space satellites. Since they don’t have a brain of their own, when you have a brain you start thinking and believing that you understand customers’ thoughts, which is actually not true. A space satellite as a product manager monitors and observes the customers, get data from them, and relies entirely on these data to make decisions. This approach ensures that the product evolves in response to real customer needs and preferences rather than the product manager’s assumptions.
Case Study related to market focus and sales success
ZTE Nubia Red Magic 5G, though being the most differentiated phone from a product feature perspective and priced at 40000 INR, has a very small market share. Since it is focused on gamers, represents a niche segment of the market.
On the other hand, the Samsung Galaxy A51 made a sale of 11.4 million in the first half of 2020 being priced at 23000 INR.
The iPhone 11, made a massive sale of 37.7 million in the first half of 2020 being priced at 42900 INR.
Hence the appeal of iPhone 11 is not just in the App Store revenue figures but also in the sales volume and overall earnings.
So, what’s the enchantment behind a less feature-packed phone driving such substantial revenue?
This directly means that “Great products are not necessarily the best products”.
It’s the competitive edge. iPhone 11 has managed to establish a more significant competitive advantage than the A51.
Now, let’s delve into the enchantment of competitive advantage through the lens of the iPhone SE. Despite being relatively ancient in the world of iPhones, the SE managed to sell 8.7 million units in the first half of 2020 at a unit price of 33 thousand, surpassing the Samsung Galaxy A51 in total revenue. Undoubtedly, the iPhone product portfolio has cultivated a distinct advantage.
Then there’s no phone, priced at 800 units. It struggles to achieve sales in the millions, likely reaching only hundreds of thousands of units. This indicates a considerably smaller market and unit price, making it an unfavorable product for product management.
Now, let’s discuss some pricing strategies:
Cost Leadership Strategy: The A51’s pricing is less than half that of the iPhone 11. This underscores an important marketing concept known as positioning. A51 positions itself as an affordable alternative to the Apple iPhone 11, competing primarily on cost.
Differentiation Strategy: In contrast, the Apple iPhone 11 proudly asserts its uniqueness and desirability in the market. It doesn’t engage in a price war; instead, it competes based on its distinct competitive advantage.
SE also follows a differentiation product strategy. Despite its age, it commands a price one and a half times higher than the very recent Galaxy A11, offering significantly fewer features. This pricing strategy doesn’t hinge on cost but on setting itself apart.
One crucial lesson to glean from these examples is that if your product is positioned as a cost leader, it may not necessitate a product manager. Then you just need to fight one cost and when you fight one cost at some point you’re going to die. To thrive, you must cultivate a substantial competitive advantage and position your product based on differentiation.
Additionally, let’s explore some more strategies:
Differentiation-focused Strategy: Nubia’s pricing at 40,000 doesn’t make it a budget product. However, its narrow focus on mobile gamers reveals a differentiation-focused strategy. It caters exclusively to a specific market segment.
Cost-focused Strategy: This is where you position your product solely on price, like the 800-rupee phone. It might be cheap, but it targets a small, specialized market. Adopting this approach can lead to an undesirable outcome.
So, as a product manager aiming for success a cost leadership or focused strategy might not be the best path. Think big, embrace a differentiation strategy, and strive to build a product with a strong competitive advantage. That’s the winning formula.
If you can unravel the mystery surrounding competitive advantage without jest, you’re fit to be tomorrow’s Chief Product Officer.
So, what exactly is this enigmatic competitive advantage?
It’s simply the willingness of a customer to pay. When customers are willing to pay more for your product, your competitive advantage strengthens. Conversely, if they’re less inclined to pay, you must position your product based on cost, relinquishing your competitive edge.
How do you boost this willingness to pay?
Here’s a quote from the venerable Steve Jobs:
“Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.”
According to him, the magic lies in getting intimately acquainted with your customers, so much so that you can anticipate their needs before they even do. If you can master this, you’re on your way to creating a formidable competitive advantage.
It all boils down to understanding your customers on a profound level. You must delve into the intricacies of consumer psychology, entering the customer’s mind. The brain, you see, has two facets, one is the emotional side, and the other is the logical side. Unfortunately, we cannot integrate both emotional and logical thinking, as the brain often operates in a “one-or-the-other” mode.
This is a very crucial aspect of customer psychology: they can’t be practically and emotionally engaged at the same time. They toggle between these modes. Picture the brain as a house, you sleep in one room, cook in another, and watch TV in yet another. Likewise, your thoughts reside in different “rooms” of your brain, shifting between emotions and practicality.
So, which part of the brain governs buying decisions?
It’s not the practical side; it’s the emotional side. Buying decisions are driven by emotions and impulses. When you purchase a phone, it’s not about MP or gigahertz; it’s about that emotional connection and appeal. It’s akin to a romantic endeavor, and once the honeymoon is over, reality sets in, and your perspective changes.
Indeed, once you’ve grasped your customers’ psychology, let’s examine this through the lens of psychological theories.
Product Adoption or Diffusion Curve:
There are five customer types, with only 16 percent falling into the category of innovators and early adopters. These individuals, often characterized as tech enthusiasts and visionaries, are particularly enthusiastic about product features. In this market segment, a product like the A51 holds appeal. However, the purchase decisions of the remaining 84 percent are driven by impulses and emotions, and it’s essential to recognize that a product cannot achieve success by solely targeting 16 percent of the population.
Maslow’s Hierarchy of Needs:
Human needs can be categorized into basic, psychological, and fulfillment. You should start by identifying and satisfying these basic needs to effectively market a product. Psychological needs encompass desires like love, belonging, and esteem, reflecting the universal quest for recognition and self-worth. Self-fulfillment needs to involve creative pursuits like music and art, providing a means of self-expression and enrichment. This framework states that as a product resonates more with psychological and self-fulfillment needs, customers become more willing to pay.
5 Product Levels Theory
Philip Kotler’s comprehensive product framework comprises five distinct types, the core product, generic, expected, augmented, and potential product. The core product addresses fundamental product needs, while the generic provides a bit more functionality. The expected product aligns closely with customer desires and preferences. In contrast, the augmented product offers additional value or features that pleasantly surprise customers. Finally, the potential product introduces innovative elements that customers may not have even considered, capable of leaving a profound impression. Hence your product must progress through these five levels of the product hierarchy to meet changing customer expectations and deliver heightened value.
The Kano Model
The model delineates three distinct types of customer needs: must, want, and wow. These categories play a pivotal role in shaping customer satisfaction levels. Continually incorporating must-have features or requirements alone will never lead to a positive satisfaction outcome; it merely keeps satisfaction stagnant at a baseline level. Even as you pile on specifications like megapixels and gigahertz, you’ll find yourself hovering around a neutral satisfaction point.
To truly elevate customer satisfaction, the product must transition from addressing must-have elements to fulfilling wants and eventually culminating in wow factors. By attending to a customer’s wants, you can significantly boost satisfaction.
In essence, understanding and catering to a diverse customer base’s needs and psychological inclinations is the key to creating a product that resonates with a broader market. By moving your product up the value chain, aligning with Maslow’s hierarchy, and addressing customers’ wants and wow factors, you can enhance its competitive advantage and appeal to a larger portion of the market beyond just the early adopters.
This is where Apple’s product differentiation comes into play. Let’s delve into Apple’s distinctive features:
1. Must-Have Features: Apple offers a 12.5 gigahertz processor, 4 GB of RAM, and a 12 MP camera. Apple’s insight here is that customers don’t buy megapixels; they purchase the ability to capture memorable moments on platforms like Facebook, Instagram, and YouTube. The technical specifications, such as 4 GB of RAM and a 12-megapixel camera, suffice for these needs. Apple follows the principle that for specific tasks, more is not necessarily better; sometimes, less is more.
2. Wants: Apple recognizes that customers prioritize superior video clarity. Despite having a 12 MP camera, Apple’s focus on video clarity stands out with its impressive 20-40 fps (frames per second), surpassing competitors like Samsung and Nubia. This intelligent selection of features aligns with what truly matters to customers, setting Apple apart.
3. Wow Factor: The real wow factor lies not in hardware specifications but in Apple’s music offerings through iTunes and its ecosystem of apps. These apps empower users to unleash their creativity, generating double the revenue compared to other app stores. Apple even invests in developers to create innovative apps, a luxury Samsung, reliant on Google’s Android, cannot replicate. This strategic approach sets Apple apart.
So, when you examine these three strategies, you can see how they harmonize. Basic needs transform into must-have features, forming the core product. Safety needs translate into generic product elements. Psychological needs become wants, constituting the expected product. Lastly, self-fulfillment needs manifest as wow factors, defining the potential or augmented product. The key is to integrate these layers seamlessly into one product.
Many other phones have overemphasized the core product while neglecting the expected and augmented levels. In essence, the approach is straightforward: enhance appeal from basic to psychological to self-fulfillment, applicable not only in the phone industry but across various sectors. As you add these layers, your WTOP (willingness to pay) naturally increases. However, it’s crucial to begin with a solid core offering, akin to providing rice before offering a delightful curry. Your core should always be ready to anchor your product evolution.
How does it master the art of accessibility and create an irresistible allure?
From the very moment of product launch, Apple cultivates desirability. Take the first iPhone, for example. Steve Jobs presented it as not just one thing but as a fusion of three: the best iPod, the best phone, and the best Internet service all in one device. This immediately kindled a willingness to pay three times the amount, as customers saw the value in consolidating these functions.
Consider Apple’s meticulous attention to customer experience, its aesthetically pleasing website, and its well-crafted communication, including blogs, news, social media, and expert endorsements, all of which revolve around the iPhone. This strategic approach builds a niche market and fosters desirability even before the product is in the hands of consumers.
Hence to succeed you must understand the customer’s journey comprehensively, tracking it from the initial stages of awareness and desire creation, through the buying decision, purchase experience, and finally, post-sales support. This end-to-end focus on the customer journey is what ultimately increases the lifetime value of your customers. The more you invest in this holistic approach, the greater the willingness to pay.
Apple’s success is driven by customer-centric product development, competitive advantage, and an understanding of customer psychology. It’s not just about having the most features or technology.
Apple’s recipe for success involves creating great, innovative products backed by top technology. Other companies often struggle to replicate this formula, but the article delves into why.
Understanding customer psychology, emotional connections, and needs can impact product development and pricing strategies.
Apple’s approach involves careful attention to customer experience, marketing strategies, and tracking the customer journey from awareness to post-sales support to increase willingness to pay.
Subhayu Ghosh – VP Product & Growth at TIER Mobility
Institute of Product Leadership is Asia’s First Business School providing accredited degree programs and certification courses exclusively in Product Management, Strategy, and Leadership.
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